January 8, 2013 at 9:32 am #57220
I’m new to the site, looking to get some advice for our (my wife and I) property in Menorca. I am 70 now, and in two years time we will come to the end of our interest only period on the mortgage and will be liable for the outstanding debt over the remaining 9 years of the mortgage. The total mortgage is €275,000 and although we would like to keep the house, it is currently on the market for €395,000.
We’ve discussed this with our son, and he would be willing to take the mortgage into his name, and we keep making the repayments via him – he is in a well paid job in the Netherlands, and has no other mortgage obligations (although may want to buy a property in the Netherlands in the future) so we assume he should be able to raise a mortgage on the property. Obviously we’re aware there would be some form of transfer tax, but could someone explain the best, most cost efficient way of doing something like this would be?
We have also seen people navigating around some of the Spanish inheritance taxes via the transfer of their properties to a UK businesses registration. It sounds impossibly complicated, but could something like this be done in conjunction with raising a new mortgage and/or transfer of ownership?
Many thanks for any advice
January 8, 2013 at 11:33 am #114486
I’m no expert but I’m pretty sure no bank will let someone in the Netherlands take out a mortgage on a property in Spain which is not in their name. If you want him to pay the mortgage payments directly then you’ll probably have to sell him the property and maybe rent it from him (which of course might not be what you want to do).
January 8, 2013 at 12:25 pm #114487
I don’t see the bank wanting to transfer the mortgage into someone else’s name, unless they are buying the property.
You best option would be for your son to ‘buy’ the property from you. Base the price on the fiscal value and have him either take over the mortgage (more than likely the bank will renegotiate the terms) or pay it off on completion.
If he buys it, you can have a special clause written into the title deeds protecting your right to stay in the property and not sell it from under you.
Expect the standard transaction costs.
January 8, 2013 at 3:02 pm #114489
The simple & pracrical & cost effective solution is to sell the property to your son. Because of your age & residence I do not think you will have to pay Capital gains tax. Besides death duty will be much higher when you or your wife dies.
Get the Bank to subrogated the mortgage to your son. The issue will be
a) How much will they lend in the current climate
b) What will be the valution the Bank will come up with
c) The current rates of interest that they will charge.
Can you or your son come up with the amount of difference that would be required under (a) & (b).
Setting up a limited company may not be an easy solutions as it brings other complications & upfront cost, running cost i.e. company residency, nominee directors, Audit/compliance.
January 8, 2013 at 3:52 pm #114491
Another factor might be life insurance. If the son buys the property he takes on a €275k mortgage with it. If the mortgage is covered by life insurance then on inheritance he would have to pay tax, but he would get the property mortgage-free. Even if there isn’t life insurance, any inheritance tax would be based on the equity in the property – it’s “value” minus the mortgage. You might find that the remianing equity is low enough not to trigger large death duties (to an extent that they are less than the costs in selling the property). As ever it’s complicated, and needs to be discussed with an expert.
January 8, 2013 at 7:26 pm #114492
Thanks to all for the helpful advice. We’re going to go away and get some facts and figures from the friendly folks at the bank. Will report back if there’s anything interesting to update.
Many thanks again.
January 8, 2013 at 8:31 pm #114498
@salbufera. I am sure that your statement was tongue & cheek. Bankers have never been friendly folks. They give you an umbrella when the sun is shinning & take it away when it rains.
Is your son married or intend to get married ?. If his marriage break ups your house could be a property his ex wife wants to get her hands on.
THe old saying ” money is the route of all problems” is more valid today than in the past.
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